The Government has decided to appoint state-owned oil and gas company Pertamina as operator of the troubled aromatic centre of PT Trans Pacific Petrochemical Indotama (TPPI) in Tuban, East Java. Operation of the petrochemical centre, which also has refinery unit, will be resumed immediately despite legal issues and investigation into its former controlling shareholder Honggo Wendratmo.
“We have decided that TPPI shall be operated by Pertamina,” said VP Jusuf Kalla after leading a meeting attended by state-owned enterprises minister Rini Mariani Soemarno and National Police Chief Badrodin Haiti Thursday (Aug 20).
Pertamina, according to Kalla, is capable to operate TPPI without involvement of other companies. Regarding litigation cases, Kalla said they can still be continued.
After restructuring of TPPI’s debts, Pertamina holds 26.61% shares, while ministry of finance 25%, Agro Capital BV 22%, while the balance owned by Sojitz and Itochu.
Responding to the decision, Amien Sunaryadi, head of the upstream oil and gas regulatory body SKKMigas, expressed his support. “TPPI indeed has some legal issues, debts, etc…But, in order to solve debt issues, TPPI should resume its operations,” he said.
TPPI has outstanding payables of US$140 million to the State through SKKMigas in the form of condensate supplies. This debt, according to Sunaryadi, can be repaid in stages if TPPI starts to make money. “In principle, we can set aside the debt issues, but legal proceedings should continue. But, we can’t let this strategic asset under-utilised,” he said.
Pertamina, according to Sunaryadi, is also asked to acquire TPPI shares currently held by Agro Capital BV. Sources said Pertamina was willing to pay US$100 million for Agro Capital’s shares in TPPI.
Few months ago, a team to reform governance in oil & gas sector led by economist Faisal Basri, based on suggestions from the board of state-owned oil and gas company Pertamina, recommended the government to allow Pertamina acquiring TPPI as the fastest way to boost domestic oil refining capacity.
TPPI, as you know, has suspended its operation because Pertamina and the Upstream Oil and Gas Regulatory Body SKK Migas stopped supplying condensates, among others due to huge amount of overdue payments from TPPI.
Pertamina previously owned 15% shares in TPPI. PT Tuban Petrochemical Industries (TPI) was majority shareholder with 59%. Other shareholders include SCG Chemicals, Nissho Iwai, and Itochu. TPI, meanwhile, is 70% owned by PT Perusahaan Pengelola Aset (PPA)—-a state-owned entity, with 30% held by Honggo Wendratmo.
We also know that Pertamina’s receivables from TPPI as at December 31, 2013 reached US$566 million, consisting of receivables from sales of Senipah condensate, Residue Delayed Payment Notes (LSWR DPN), and non-operating activities. SKKMigas, meanwhile, recorded unpaid receivables of US$141 million as at February 28, 2014.
SBY-Boediono administration tried to help TPPI with the resumption of feedstock supply. SKK Migas then assigned Pertamina to sell the State’s portion of crude oil/condensate for TPPI for a period of October 31, 2013 to April 30, 2014. The Supreme Audit Agency (BPK), however, questioned SKKMigas’ appointment of Pertamina, which supplies 2.045 million barrels worth US$209.43 million worth of condensates to TPPI in the period of October 31, 2013 to January 2014. The transaction, according to BPK, has triggered Trafigura to file demurrage, losses, and hedging claims worth US$1.6 million to SKKMigas.
Complexity of issues, including with other creditors of TPPI, combined with suspicious transactions led the Corruption Eradication Commission (KPK) to warn the government to be careful in assessing recommendations on TPPI.
TPPI has the capacity to process 100,000 barrels per day of condensate into both fuels (gasoline) and petrochemicals (500,000 tons of paraxylene, 120,000 tons of toluene, and 200,000 tons of benzene per annum).
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